This is correct. If Apple made a mistake (still a big if), it's building a phone that was simply too expensive.

The margin numbers that can be found are also for Apple as a company. Given the growth in services which should be high margin, this means the iPhones margins have been shrinking even with the price increases.

Even if the margins don't increase, by selling the same amount of more expensive phones, the profit will.

Looking at the iPhone SE, I wonder if it's relatively low profit and retail cost had a role to play in it's death. If I was Apple having that customer buy a 7 instead seems like a better deal for me.